Economics Ch.5

Which of the following is the best definition of elasticity?

• Group of buyers and sellers of a particular good or service

• Measure of how much buyers and sellers respond to changes in market conditions

• The price that balances quantity supplied and quantity demanded

• Something that induces a person to act

What do we call a good that has an income elasticity less than 0? An example would be the income for the region causing a rise in demand of subway fares.

• Complement

• Inferior good

• Substitute

• Normal good

What do we call a good that has an income elasticity of more than 1? An example would be if income in a region rises then there would be an increase in demand for popular brands of shoes.

• Complement

• Inferior good

• Substitute

• Normal good

A company is trying to figure out how much to raise or lower the price of their good so they want to compare it to another company's product. Which of the following should they use to figure this out?

• Income elasticity of demand

• Total revenue calculation

• Cross-price elasticity of demand

• Price elasticity of demand

If elasticity equals 0.6, demand will be

• Elastic

• Inelatic

• Perfectly inelastic

• Perfectly elastic

If elasticity is 1.7 then demand is

• Elastic

• Inelastic

• Perfectly inelastic

• Perfectly elastic

If quantity demanded responds substantially to changes in price it is said to be

• Elastic

• Inelastic

If quantity demanded responds only slightly to a change in price it is said to be

• Elastic

• Inelastic

The following is the definition for which term? A measure of how much the quantity demanded of a good responds to a change in the price of that good.

• Price elasticity of demand

• Income elasticity of demand

• Cross-price elasticity of demand

• Total revenue

The price elasticity of supply of a Picasso painting would be

• elastic

• inelastic